Short-Term Institutional Investors and Mispricing

2012 ◽  
Author(s):  
Darius Palia ◽  
Valentin Dimitrov
Keyword(s):  
Institutional Investors ◽  
Short Term

Strategic Distortions in Analyst Target Prices in the Presence of Short-Term Institutional Investors

2015 ◽  
Author(s):  
Pawel Bilinski ◽  
Douglas J. Cumming ◽  
Lars Helge Hass ◽  
Konstantinos Stathopoulos ◽  
Martin Walker
Keyword(s):  
Institutional Investors ◽  
Short Term

scholarly journals The Rise of Institutional Investors

2019 ◽  
Author(s):  
Jan Fichtner
Keyword(s):  
Mutual Funds ◽  
Hedge Funds ◽  
Institutional Investors ◽  
Private Equity ◽  
Short Term ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Important Position ◽  
State Street ◽  
Asset Managers

During the last decades, institutional investors gained an ever more important position as managers of assets and owners of corporations. By demanding (short-term) shareholder value, some of them have driven the financialization of corporations and of the financial sector itself. This chapter first characterizes the specific roles that private equity funds, hedge funds, and mutual funds have played in this development. It then moves on to focus on one group of institutional investors that is rapidly becoming a pivotal factor for corporate control in many countries – the “Big Three” large passive asset managers BlackRock, Vanguard and State Street.

scholarly journals Institutional Shareholdings and Financial Characteristics of Malaysian Listed Companies

2020 ◽  
Author(s):  
Shamsul Naharabdullah ◽  
Mohd Azlan Yahya ◽  
Faisol Elham
Keyword(s):  
Institutional Investors ◽  
Listed Companies ◽  
Financial Ratios ◽  
Short Term ◽  
Growth Ratio ◽  
Primary Motivation ◽  
The Mean ◽  
Financial Characteristics ◽  
Institutional Shareholders

This study attempts to investigate the extent to which the financial characteristics of firms are related to institutional shareholdings. The primary motivation to carry out the study comes from an earlier paper by Hessel and Norman (1992), which showed that seven financial ratios discriminated between strongly-held and institutionally-neglected firms. As an extension of the study, the present study seeks to investigate the seven financial ratios among Malaysian companies by identifying differences in the means of the seven ratios between a group of companies with substantial institutional shareholdings against another group of companies with negligible institutional shareholdings. The findings, from a sample of KLSE listed companies, broadly support the findings by Hessel and Norman (1992), in which firms with significant institutional shareholdings exhibited a significantly higher profitability ratio against firms that were neglected by institutional investors.. This suggested that institutional investors placed greater emphasis on a firm's short-term results. Our evidence also did not indicate institutional shareholders' direct involvement in ensuring a firm's long-term growth and competitiveness, as shown by the insignificant differences in the mean of growth ratio between firms that had significant institutional shareholdings and those that were neglected by institutional investors.  

Are smart beta funds really smart? Evidence from rational and quasi-rational investor sentiment data

2019 ◽  
Vol 12 (2) ◽  
pp. 97-118
Author(s):  
Rahul Verma ◽  
Gökçe Soydemir ◽  
Tzu-Man Huang
Keyword(s):  
Institutional Investors ◽  
Institutional Investor ◽  
Individual Investors ◽  
Leading Indicators ◽  
Individual Investor ◽  
Short Term ◽  
Content Type ◽  
Economic Fundamentals ◽  
Investor Sentiments ◽  
Smart Beta

Purpose The purpose of this paper is to examine the relative effects of rational and quasi-rational sentiments of individual and institutional investors on a set of smart beta fund returns. The magnitudes of the impacts of institutional investor sentiments are greater than those of individual investor sentiments. In addition, both rational and quasi-rational sentiments of individual and institutional investors have significant impacts on smart beta fund returns. The magnitudes of the impacts of quasi-rational sentiments are greater than those of the rational sentiments for both types of investors (quasi-rational sentiments of institutional investors have the maximum impact). These results are consistent with the arguments that professional investors consider the sentiments of individual investors as contrarian leading indicators which are mainly driven by noise while conform the sentiments of institutional investors which are driven by more rational factors. A majority of smart beta funds in the sample outperform the S&P500 returns in the short term but fail to consistently beat the market. The authors find evidence that smart beta funds with consistently high returns are relatively less (more) driven by individual (institutional) investor sentiments. Overall, the authors argue that smart beta funds appear to follow quasi-rational sentiments of both individual and institutional investors that are not rooted in economic fundamentals. Design/methodology/approach The results of the impulse functions generated from a multivariate model suggest that the smart beta fund returns are negatively (positively) impacted by individual (institutional) investor sentiments. Findings The magnitudes of the impacts of institutional investor sentiments are greater than those of individual investor sentiments. In addition, both rational and quasi-rational sentiments of individual and institutional investors have significant impacts on smart beta fund returns. The magnitudes of the impacts of quasi-rational sentiments are greater than those of the rational sentiments for both types of investors (quasi-rational sentiments of institutional investors have the maximum impact). Originality/value These results are consistent with the arguments that professional investors consider the sentiments of individual investors as contrarian leading indicators which are mainly driven by noise while conform the sentiments of institutional investors which are driven by more rational factors. A majority of smart beta funds in the sample outperform the S&P500 returns in the short term but fail to consistently beat the market. The authors find evidence that smart beta funds with consistently high returns are relatively less (more) driven by individual (institutional) investor sentiments. Overall, the authors argue that smart beta funds appear to follow quasi-rational sentiments of both individual and institutional investors that are not rooted in economic fundamentals.

scholarly journals The Influence of Long-Term and Short-Term Institutional Investors on Complicated Mispricing of Stocks

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-14
Author(s):  
Bing Liu
Keyword(s):  
Institutional Investors ◽  
Opposite Effect ◽  
Short Term ◽  
Promoting Effect ◽  
Inhibiting Effect ◽  
Chinese Listed Companies ◽  
Stock Mispricing ◽  
Information Opacity ◽  
Heterogeneous Effect

Taking Chinese listed companies from 2009 to 2017 as the research objects, this paper aims at exploring the heterogeneous effect of short-term and long-term institutional investors on stock mispricing. The empirical study finds that long-term institutional investors have an inhibiting effect on stock mispricing, while short-term institutional investors have an opposite effect. When the company information opacity is high, long-term institutional investors have a more obvious inhibiting effect on stock mispricing while short-term institutional investors have a more obvious promoting effect on stock mispricing. When the attention of analysts is enhanced, long-term institutional investors further restrain the stock mispricing while short-term institutional investors further promote the stock mispricing.

Understanding the Use of Long-Term Finance in Developing Countries

2018 ◽  
Author(s):  
María Soledad Martinez Pería ◽  
Sergio L. Schmukler
Keyword(s):  
Developing Countries ◽  
Capital Markets ◽  
Institutional Investors ◽  
Developed Countries ◽  
Financial Intermediaries ◽  
Short Term ◽  
Foreign Investors ◽  
Short And Long Term ◽  
Asset Managers

This chapter reviews recent evidence on the use of long-term finance in developing countries (relative to developed ones) to try to identify where short- and long-term financing occurs, and what role different financial intermediaries and markets play in extending this type of financing. Although banks are the most important providers of credit, they do not seem to offer long-term financing. In fact, loans in developing countries have significantly shorter maturities than those in developed countries. Capital markets have become increasingly sizable since the 1990s and can provide financing at fairly long terms. But just a few large firms use these markets. Only some institutional investors provide funding at long-term maturities. Incentives for asset managers are tilted toward the short term due to constant monitoring. Instead, asset-liability managers have a longer-term horizon, as foreign investors in developing countries do. Governments might help expand long-term financing, although with limited policy tools.

Long horizon institutional investors and the relation between missing quarterly analyst forecasts and CEO turnover

2019 ◽  
Vol 27 (2) ◽  
pp. 190-223
Author(s):  
Juan Wang
Keyword(s):  
Institutional Investors ◽  
Institutional Ownership ◽  
Ceo Turnover ◽  
Career Concerns ◽  
Analyst Forecast ◽  
Positive Relation ◽  
Short Term ◽  
Content Type ◽  
Short Termism

Purpose The purpose of this paper is to investigate the effect of long horizon institutional ownership on CEO career concerns to meet the short-term earnings benchmark. Design/methodology/approach Using a sample of 10,565 firm-year observations in the USA, the paper examines the extent to which long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast. Findings After controlling for the general performance-turnover relation, this paper finds that long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast. This finding is stronger when CEOs focus on long-term value creation and do not sacrifice long-term value to boost current earnings and is stronger when the monitoring intensity by long horizon institutional investors is greater. Research limitations/implications The results suggest that long horizon institutional investors serve a monitoring role in alleviating CEO career concerns to meet the short-term earnings benchmark. Originality/value This paper contributes to the literature on the relation between long horizon institutional ownership and attenuated managerial short-termism. The literature is silent about why long horizon institutional investors alleviate managerial short-termism. This paper fills this void in the literature by documenting that long horizon institutional investors mitigate CEO career concerns for managerial short-termism. Moreover, this paper contributes to the literature on the monitoring role of institutional investors by documenting the incremental effect of institutional ownership on CEO career concerns to meet the short-term earnings benchmark.

scholarly journals Executive Incentives Matter for Corporate Social Responsibility under Earnings Pressure and Institutional Investors Supervision

2020 ◽  
Vol 12 (6) ◽  
pp. 2492 ◽  
Author(s):  
Lili Ding ◽  
Zhongchao Zhao ◽  
Lei Wang
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Institutional Investors ◽  
Short Term ◽  
Institutional Csr ◽  
Csr Strategy ◽  
Technical Csr ◽  
Corporate Social ◽  
The Impact

This paper theoretically explores the impact of the incentive preferences of executives (i.e., short-term incentives and long-term incentives) on corporate social responsibility (CSR) decisions (i.e., institutional CSR and technical CSR). Further, the paper presents the mechanism through which executives influence CSR activities by the pressures from financial analysts and institutional investors supervision. Using a large sample of China-listed firms over 2007–2017, we achieve some helpful empirical results. The executives with short-term incentives tend to implement technical CSR strategy, while those with long-term incentives tend to implement institutional CSR strategy. Executives with short-term incentives, compared with those with long-term incentives, show stronger inter-temporal tradeoffs behaviors in the earnings pressure context. Furthermore, dedicated institutional investors can effectively attenuate the hypocritical behaviors of executives, and the effectiveness of governance shows a positive relationship with investors’ horizon. Our findings enrich the understanding on the relationship between the executives and CSR decisions in the earnings pressure context and further helps to perfect the institutional design in China’s listed companies.

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